Company Formation in Latvia
Service Name
Start
Pro
Elite
Company Name Check and Reservation
Company Formation including Government Fees
Company Secretarial Services for the First Year
Incorporation Documents Package
Registered Office Address for 1 Year
Corporate Bank Account Opening
–
Assistance with VAT Number Registration
–
–
Total Cost
€950
€1550
€2150
Company Formation in Latvia: A Strategic Guide for Business in the EU
Latvia, with its strategic location as a bridge between the West and East, a business-friendly environment, and a rapidly developing digital infrastructure, has become a compelling choice for company formation. As a full member of the European Union and the Eurozone, Latvia offers a stable and transparent jurisdiction for both local and international entrepreneurs. This comprehensive guide will walk you through the entire process, from understanding the core benefits to navigating post-incorporation compliance. Mastering the Latvian company registration process is a crucial step towards building a successful and tax-efficient business within the EU.
Why Choose Latvia for Company Formation?
The most common business structure in Latvia is the Limited Liability Company (SIA), which is the equivalent of a UK LTD. It offers a range of significant advantages that attract a wide variety of businesses.
Favorable Tax Regime: Latvia offers a highly attractive corporate income tax rate of 0% on reinvested profits. This means that companies only pay a tax of 20% when profits are distributed as dividends. This unique system encourages business growth and reinvestment.
Access to the EU Single Market: As a full member of the European Union, a Latvian company enjoys unrestricted access to the EU Single Market and its over 450 million consumers. This status provides legal clarity and simplified trading across all member states.
Eurozone Membership: Latvia’s use of the euro simplifies international transactions and eliminates currency risk when dealing with other Eurozone countries. This financial stability is a significant advantage for global businesses.
Straightforward and Digital Process: The company formation process is highly digitalized and efficient. The Register of Enterprises (Uzņēmumu reģistrs) has made the online application process fast and user-friendly, especially for those with an e-signature.
Limited Liability Protection: The SIA structure provides shareholders with limited liability, protecting their personal assets from the company’s debts and liabilities.
Pre-Incorporation Checklist: What You Need to Know
Before you initiate the company registration process, several key decisions and preparations are essential.
Choosing a Company Name: The company name must be unique and not be identical to an existing one. You can perform a preliminary check on the Register of Enterprises’ website. The name must also indicate the legal form, such as “SIA.”
Appointing Directors and Shareholders: A Latvian SIA requires at least one director and one shareholder. There are no residency requirements for directors or shareholders, making it a highly flexible option for non-residents.
Defining the Registered Office Address: Your company must have a registered office address in Latvia. This is the official location for receiving legal documents and correspondence. Many companies, especially non-residents, use the services of a professional company formation agent to provide this address.
Determining the Share Capital: The minimum share capital for a standard SIA is €2,800. A special regime exists for a “small” SIA with a minimum share capital of just €1 to €2,799, which has specific limitations but is ideal for startups.
Preparing Legal Documents: The primary legal documents are the Memorandum of Association and the Articles of Association. These documents define the company’s objectives, share capital, and internal regulations.
The Company Formation Process: A Step-by-Step Guide
The Latvian company incorporation process is managed by the Register of Enterprises. The most efficient method is to apply online, especially if you have a Latvian e-signature, or to use a professional corporate service provider.
Document Preparation: Your legal representative will prepare all necessary documents, including the Memorandum and Articles of Association, and the application form.
Payment of Share Capital: The minimum share capital must be paid into a temporary bank account opened in the company’s name.
Submit the Application: The application, along with the signed documents and proof of share capital payment, is submitted to the Register of Enterprises.
Awaiting Approval: The Register will review the application. The processing time can be as short as 2-3 business days for an expedited process.
Receive the Certificate of Incorporation: Upon approval, the Register will issue a Certificate of Incorporation, which is the official legal document that proves your company’s existence.
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Post-Incorporation Compliance and Obligations
The responsibilities of a Latvian SIA continue after formation. Failure to meet these obligations can result in fines and legal action.
Annual Financial Statements and Tax Filings: All Latvian companies are required to prepare and file annual financial statements with the Register of Enterprises. This must be done within four months of the end of the financial year. The company must also submit its annual corporate income tax return to the State Revenue Service (VID). It is critical to adhere to these deadlines, as late filings can result in significant penalties and negatively impact your company’s good standing.
Maintenance of Statutory Registers: You must maintain a set of internal registers, including a register of directors and shareholders.
Economic Substance: To benefit from Latvia’s favorable tax treaties and reputation, it’s essential to demonstrate economic substance. This can be achieved by having local directors, a physical office, and employees, although this is not a strict requirement for all business types.
Practical Considerations for International Founders
For those based outside Latvia, setting up a company is straightforward but requires careful planning.
Company Tax Residency: While a company incorporated in Latvia is usually a Latvian tax resident, its tax residency can be challenged. The deciding factor is often the “central management and control” test. If all key business decisions and management are conducted by directors residing in another country, the company may be deemed a tax resident of that country as well. This can lead to complex international tax issues, making professional advice essential.
Banking and Fintech Solutions: Opening a business bank account for a newly formed Latvian company can be challenging, particularly if the beneficial owners and directors are non-residents. Banks have strict KYC (Know Your Customer) and due diligence procedures. However, the rise of Fintech and digital banking solutions has created new opportunities. Many of these platforms offer remote onboarding, streamlined processes, and can provide business accounts with a EUR IBAN, making them a viable and often more efficient alternative to traditional Latvian banks.
The Importance of Local Expertise: Navigating the legal and tax landscape in Latvia, especially the unique corporate tax system, requires local expertise. Engaging a reputable corporate service provider or law firm is crucial to ensure a smooth formation process and ongoing compliance.
Conclusion
Company formation in Latvia offers a strategic and tax-efficient pathway for international entrepreneurs and businesses. The combination of a unique 0% corporate tax rate on reinvested profits, full EU membership, and a highly digitalized process provides an exceptional platform for global operations. By understanding the straightforward incorporation process and committing to ongoing compliance and economic substance requirements, you can successfully leverage the power and credibility of a Latvian SIA to achieve your business goals.
FAQ
Latvia's key advantages include its unique 0% corporate tax rate on reinvested profits, full access to the EU Single Market, and a highly digitalized, efficient registration process.
No, there are no residency requirements for directors or shareholders. This makes it a highly flexible option for international entrepreneurs.
The minimum share capital is €2,800 for a standard Limited Liability Company (SIA). A special regime for "small" SIAs allows for a share capital between €1 and €2,799.
The process is managed by the Register of Enterprises. For online applications, it can be completed in as little as 2-3 business days with the use of a Latvian e-signature.
You must file annual financial statements with the Register of Enterprises and submit an annual corporate income tax return to the State Revenue Service (VID).
Latvia has a unique system where companies are taxed at a 20% rate only when profits are distributed as dividends. Reinvested profits are not taxed, encouraging business growth.
A company's tax residency is determined by where its "central management and control" is exercised. If key business decisions are made outside of Latvia, the company may be considered a tax resident of another country as well, which can lead to complex tax issues.
While traditional banks may have strict due diligence, many Fintech and digital banking solutions offer a more streamlined, remote onboarding process. These platforms can provide a business account with a EUR IBAN, which is a popular solution for non-residents.
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